The government has decided to limit securities firms’ real estate-related investment ceiling to within 100% of their own capital. Risk values for the net capital ratio (NCR) applied when securities firms invest in real estate will also be subdivided to strengthen real estate soundness regulations.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced on Dec. 23 that they would implement a regulatory change notice for partial amendments to the Financial Investment Business Regulations and the Detailed Enforcement Rules of Financial Investment Business Regulations that restrict securities firms’ real estate investment concentration. The partial amendments to the Financial Investment Business Regulations and the Detailed Enforcement Rules of Financial Investment Business Regulations will undergo regulatory change notice from Dec. 24 until Feb. 2 of next year, and will be finalized through review and resolution by the Securities and Futures Commission and the Financial Services Commission.
According to the amendment, while currently securities firms are only required to manage real estate-related debt guarantee amounts within a 100% limit of own capital, going forward they must manage the “total real estate investment amount” that encompasses not only debt guarantees but also loans and funds. However, for securities firms that exceed the total real estate investment amount limit at the time of the amendment’s implementation, the limit will be applied and reduced gradually (2026: 130%→2027: 120%→2028: 110%→2029: 100%).
Previously, when calculating real estate debt guarantee amounts, only 50% of exposure to domestic non-residential facilities and overseas real estate was reflected, but going forward 100% will be reflected. The provisioning rates for normal and precautionary credits related to real estate project financing (PF) in the securities industry will also be adjusted upward to levels similar to other sectors.
The calculation method for NCR risk values applied when securities firms make real estate investments will also be changed. Currently, NCR risk values were uniformly applied according to investment types such as debt guarantees and loans. This resulted in different actual risk levels depending on the progress stage of real estate projects being invested in or loan-to-value (LTV) ratios, but these aspects were not reflected. Going forward, NCR risk values will be differentially applied based on the progress stage of each project (bridge loans, main PF, non-PF) and LTV levels rather than investment types.
The concentration phenomenon where comprehensive financial investment business operators focus only on low-risk investment targets when investing in venture capital will also be prevented. When calculating comprehensive investment companies’ venture capital supply obligation performance, investment amounts in A-grade bonds and mid-sized companies will be recognized only up to a maximum of 30% of the venture capital supply obligation amount, regardless of how large the amount. For example, if 100 won is raised through commercial paper and integrated managed accounts (IMA), at least 25 won must be supplied to venture capital, but funding supply to A-grade bonds and mid-sized companies will only be recognized as venture capital up to 7.5 won, which is 30% of 25 won.
This amendment also includes provisions to unify major shareholder review requirements with other sectors, considering equity with other sectors when reviewing financial investment business licenses.
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